Yadkin Valley Financial Corp. has a market cap of $46.8 million; its shares were traded at around $2.9 with and P/S ratio of 0.4.

Highlight of Business Operations:

Total assets at June 30, 2010 were $2,240.2 million, an increase of $126.6 million, or 6.0%, compared to assets of $2,113.6 million at December 31, 2009. This increase was mainly due to an increase of interest bearing deposits from $2.6 million as of December 31, 2009 to $184.6 million as of June 30, 2010. The loan portfolio, net of allowance for losses, was $1,603.5 million compared to $1,627.8 million at December 31, 2009. Gross loans held-for-investment decreased by $28.7 million, or 1.7%. The allowance for loan losses decreased $4.3 million driven primarily by decreases in gross loans as well as a decrease in criticized loans not considered impaired. Allowance for loan losses assessed on classified loans decreased as improvements were made in the calculation of potential losses related to classified loans. Beginning in the first quarter of 2010, we began to incorporate twelve month averages of default trends and historical charge-offs, rather than the single point we used in prior quarters, which resulted in decreased reserves of $4.5 million within the general allowance portfolio. This decrease resulted as the Company noted that loss estimates and actual charge-offs data for the previous 12 month period varied from management estimates made at December 31, 2009 (using data as of a single point in time) as an overage loss experience over a period of time is a better indicator of expected losses than loss experience at a single point in time. We believe that these twelve month averages result in a more accurate calculation of probable loss. Offsetting the resulting decrease related to classified loans and decreases in loan balances were increases in other factors impacted by increased past dues, nonaccruals and charge-offs.

Mortgage loans held-for-sale decreased by $0.2 million, or 0.3%, from December 31, 2009 to June 30, 2010 as the Bank continued its strategy of selling mortgage loans mostly to various investors with servicing rights released and to a lesser extent to the Federal National Mortgage Association with servicing rights retained. These loans are normally held for a period of two to three weeks before being sold to investors. More loans held-for-sale were sold during the quarter ended June 30, 2010 than the quarter ended December 31, 2009, which reduced the amount outstanding. Mortgage loans closed in the first six months of 2010 ranged from a low of $40.4 million in February to a high of $75.0 million in June and totaled $337.2 million. Mortgage loans closed during the six months ended June 30, 2009 totaled $1,140 million. The slowdown in refinance activity and overall decrease in real estate sales, contributed to the decrease in gains on sales of mortgages and to the decreased volume in mortgage loans originated and sold.

Deposits increased $131.7 million, or 7.2%, comparing June 30, 2010 to December 31, 2009. Overall, noninterest-bearing demand deposits increased $3.1 million, or 1.5%, NOW, savings, and money market accounts increased $23.3 million, or 5.2%, Certificates of deposit (CODs) over $100,000 decreased $44.7 million, or 8.0%, and other CODs increased $150.0 million, or 24.7%. The Bank promoted one or more special money market account and COD rates during the first quarter which attributed to the majority of the increase in other CODs.

Borrowed funds decreased $4.8 million or 3.9% comparing June 30, 2010 to December 31, 2009. Repurchase agreements decreased $4.1 million, while advances from FHLB and overnight borrowings decreased slightly. Long term borrowings included $35.0 million in trust preferred securities and advances from the FHLB of $39.0 million. The American Community merger added $10.4 million in trust preferred securities at a rate equal to the three-month LIBOR rate plus 2.80% and will mature in 2033. Yadkin Valley Statutory Trust I (the Trust) issued $25.9 million in trust preferred securities at a rate equal to the three-month LIBOR rate plus 1.32%. The trust preferred securities mature in 30 years, and can be called by the Trust without penalty after five years.

Net income for the three-month period ended June 30, 2010 was $285,000 before preferred dividends, compared to a net loss of $6.6 million in the same period of 2009. Net loss available to common shareholders for the three-month period ended June 30, 2010 was $486,000. Net loss available to common shareholders for the three-month period ended June 30, 2009 was $7.1 million. Basic and diluted losses per common share were $0.03 for the three-month period ended June 30, 2010. Basic and diluted losses per common share were $0.46 for the three month period ended June 30, 2009. On an annualized basis, second quarter results represent a return on average assets of (0.09)% at June 30, 2010 compared to (1.27)% at June 30, 2009, and a return on average equity of (1.26)% compared to (12.81)% at June 30, 2009.

Net income for the six month period ended June 30, 2010 was $1.2 million before preferred dividends, compared to a net loss of $10.7 million in the same period of 2009. Net loss available to common shareholders for the six months ended June 30, 2010 was $342,000, compared to a net loss available to common shareholders of $11.7 million for the six months ended June 30, 2009. Basic and diluted losses per common share were $0.02 for the six months ended June 30, 2010. Basic and diluted losses per common share were $0.87 for the six months ended June 30, 2009. On an annualized basis, year-to-date results represent a return on average assets of (0.03)% at June 30, 2010 compared to (1.19)% at June 30, 2009, and a return on average equity of (0.45)% compared to (10.66)% at June 30, 2009.

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